26 Nov 2018
TM reports operational improvement for 3Q2018 despite challenging environment
Key Highlights of 3Q2018:
Key Highlights of YTD 2018:
Announces Revised Dividend Policy |
Telekom Malaysia Berhad (TM) today announced its financial results for the quarter ended 30 September 2018. The Group saw steady operational performance, amidst heightened challenges in its operating environment, namely industry and market challenges impacting its revenue.
The Group held revenue steady, at RM2.95 billion in 3Q2018, 0.3% higher from RM2.94 billion in the previous quarter, on the back of higher data as well as other telecommunication related services revenue.
Group Reported Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for 3Q2018 grew 11.3% to RM941.4 million as compared to RM845.9 million in 2Q2018 mainly due to lower operating costs. Group Normalised EBITDA, which excludes non-operational items, increased 13.1%, at RM930.9 million.
However, due to impairment loss on wireless and fixed network assets, the Group recorded Loss Before Interest and Tax (LBIT) at RM631.8 million for 3Q2018. Without the reported impairment and other non-operational items, the Group’s Normalised Earnings Before Interest and Tax (EBIT) is at RM315.6 million for 3Q2018, a 39.4% increase against Normalised EBIT of RM226.4 million in 2Q2018.
Consequently, the Group reported Loss After Tax and Non-controlling Interests (LATAMI) of RM175.6 million compared with RM102.0 million Profit After Tax and Non-controlling Interests (PATAMI) in the prior quarter. TM’s core net profit, or Normalised PATAMI excluding non-operational items, stood at RM266.4 million, a 71.0% improvement sequentially.
The total capital expenditure (CAPEX) investment for the first nine months of 2018 at RM1.32 billion, or 15.1% of revenue. This is within TM’s full year capex guidance of 19-20% of revenue. By asset type, access comprised 62% of total spending, followed by core network at 15% and the remaining 23% was for support systems.
Imri Mokhtar, Acting Group Chief Executive Officer, TM said: “We continue to face various headwinds from competitive market dynamics. Nonetheless, we held revenue steady over the quarter, and saw our cost reduction initiatives bearing fruit, by recording improved operational performance for QoQ and YoY.
However, in light of the continued pressure from industry and market challenges and its impact on our revenue thus far, we have taken a prudent view, by undertaking the impairment of our network assets – this resulted in close to a RM1.0 billion impairment loss this quarter.”
“The operational improvement in 3Q2018 is testament to the Group’s commitment to the four (4) pillars of our Performance Improvement Programme (PIP 2018) - Revenue Uplift / Preservation, Sustained Profitability, Improved Cash Flow and Increased Productivity that will navigate us through these headwinds. We are rationalising our business, reducing operating costs and focusing our resources on the opportunities that will have the most impact,” Imri elaborated.
“We currently have 2.29 million broadband customers and our unifi customer base continues to grow at 1.26 million as at end of 3Q2018 as compared to 1.06 million as at the end of the corresponding quarter last year. In terms of convergence, we saw more customers moving up the value chain with having triple-play services and above, evidenced by our convergence penetration now at 48% of TM’s household penetration compared with 39% this time last year,” he added.
“We will continue to strengthen our products and services portfolio and we are stepping up how we aggressively compete in the market, with greater sales and Go-To-Market activities on the ground. We are also working hard to reach more customers with various fit-for-purpose technologies to ensure that everyone can have the benefit of higher broadband speeds and enhanced experience. On top of that, we also have continuous engagements with the Ministry and the regulator to work toward mutually beneficial outcomes - for an improved broadband experience and help build a more balanced and inclusive digital nation, whilst at the same time balancing the business sustainability of the Group and the interests of our other stakeholders.”
TM also announced a revised dividend policy which states that the Company intends to distribute yearly dividends of 40 to 60% from its PATAMI. Dividends will be paid depending on overall business and earnings performance, capital commitments, financial conditions, distributable reserves and other relevant factors. The dividend policy will take effect from the next dividend declaration.
“This is a matter of great importance to us. In light of the current operating landscape and after careful consideration of the potential impact on our earnings alongside our efforts to transform the Company to adapt thereto, the Board has determined the review of our dividend policy to support TM’s long-term strategic objectives.”
As Malaysia’s Convergence Champion, TM remains committed to fulfilling Malaysians’ digital and communication needs of all customer segments i.e., consumer, SME, corporate enterprises, public sectors, access seekers etc via our business clusters, unifi (consumer & SME), TM ONE (Enterprise and Public sectors) and TM Global (Global and Wholesale).
Prospects for the Current Financial Year Ending 31 December 2018
The recent industry challenges and market environment have had major impact to the overall revenue estimates and earnings of TM Group in the financial year. TM anticipates that the challenging environment will persist for both its retail and wholesale segments. In the midst of these challenges, TM will continue to focus towards strengthening performance of its core business and operations.
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TM Group collaborates with MACC to combat corruption
A testament to its zero tolerance towards corruption, Telekom Malaysia Berhad Group of Companies (TM Group), following on from its recent Ikrar Bebas Rasuah (IBR) pledge continues to collaborate with Malaysia Anti-Corruption Commission (MACC). The Group has been working closely with MACC in establishing a business environment with the highest level of ethics and integrity, which include TM business partners. TM Group has also established a special unit that specifically looks into upholding high level of integrity and good governance values in the Group’s daily operations; which cover its transactions with vendors and overall partners' ecosystem. The special unit and the special officer seconded from MACC under the unit are reporting directly to the Special Integrity Committee chaired by Group Chief Executive Officer and Deputy Group Chief Executive Officer, reflecting the close ties between both organisations. With Warga Keluarga TM nationwide taking the pledge of Ikrar Bebas Rasuah (IBR) recently, the efforts have been further intensified and as a result, several arrests were recently made by MACC following internal investigations held by the Group on dubious transactions and activities. “At TM, we are committed to uphold integrity, governance and transparency, with zero tolerance of any improper and irregular practices on the part of our partners or our employees. We have always been at the forefront in championing the Company's pledge to ensure the integrity of our processes, people and reputation as well as the sustainability of our operations. This is supported by our KRISTAL values which emphasise ‘uncompromising integrity’ in all TM’s dealings with our various stakeholders,” said Dato’ Sri Mohammed Shazalli Ramly, Group Chief Executive Officer, TM. Commenting on the recent arrests of TM employees, Dato’ Seri Shazalli said, “We continue to work closely with MACC and taking off from the collaboration, we have conducted our internal investigations and inquiries which have left no stones unturned. We will go to the fullest extent to enforce the law and we never compromise on such wrongful acts of bribery, abuse of power, falsifying of information and forging of documents. So, let the recent arrests serves as a stern warning to all – including vendors, business partners and even Warga Keluarga TM.” Internally, TM has taken immediate and appropriate action to reprimand the staff and contractors concerned. TM stands by its position, as set out in its robust and thorough internal policies and processes, which are in line with industrial relations best practice. The findings of the internal investigations are then subsequently handed over to MACC for onward legal actions. We are also play a very important role to support MACC during the investigation stage. TM will always be on the lookout and will continue to investigate internally; and collaborate with MACC so there may be further cases in future as the Company continues the fight for this noble cause. “These activities of the lowest integrity will definitely affect the provisioning of communications services to the Rakyat and hamper the delivery of its benefits to Malaysians nationwide. TM Group as the one and only trusted to deliver the national communications backbone and Malaysia’s key enabler for national communications infrastructure is committed to combat such activities towards safeguarding the national interests. At the same time, we would like to thank MACC for all the co-operation and support that they have lent us in ensuring a corruption-free environment at TM,” he added.
TM and Huawei seal strategic partnership to further enhance malaysia’s broadband reach and digital economy
As pioneers in the rollout of high speed broadband in the country, Telekom Malaysia Berhad (TM) and Huawei Technologies (M) Sdn Bhd (Huawei) are once again collaborating for the betterment of broadband and digital economy for the nation. The companies recently signed a Memorandum of Understanding (MoU) for both parties to work hand-in-hand in multiple collaboration activities, leveraging on each other’s core expertise and capabilities to accelerate fibre broadband network reach, in line with the Government’s move to drive Malaysia’s digital economy. The collaboration will leverage on the combined strengths and capabilities of both companies to further accelerate national broadband reach and leap-frog the adoption of a connected digital lifestyle and the Internet of Things (IOTs) amongst Malaysians. Via the strategic partnership, both TM and Huawei will play a more proactive developmental role in providing ready infrastructure and ecosystem to support the nation’s growth. The MoU was signed by Datuk Bazlan Osman, Executive Director / Deputy Group Chief Executive Officer, TM and Foo Fang Yong, Vice President of Huawei Technologies (M) Sdn Bhd. The signing ceremony was witnessed by Dato’ Sri Mohammed Shazalli Ramly, Managing Director / Group Chief Executive Officer, TM and Baker Zhou, Chief Executive Officer of Huawei Technologies (M) Sdn Bhd. Commenting on the partnership, Dato’ Sri Mohammed Shazalli Ramly said, “We are indeed excited to be working hand in hand with a leading global name such as Huawei to accelerate the offering of digital services and solutions to the nation thus further support the Government’s aspirations of digital economy. As the trusted partner in key nation-building initiatives, TM ensures the safety and security of the nation's strategic and critical infrastructure, and in accelerating the broadband reach for all Malaysians. We believe that strategic collaborations such as this MoU is yet another testament of our role as the country’s key enabler for the national communications infrastructure.” Meanwhile, Baker Zhou said: “Telekom Malaysia and Huawei have been working hand-in-hand for 15 years. In the past 15 years, we have worked together to connect more people than ever before. We are now at the crossroads of digital transformation. With today's MoU, we can share more, innovate better, and work more closely than ever before. Huawei will fully support TM’s vision of “Making Life and Business Easier”, and will work together with TM to building a better connected and intelligent Malaysia.” The inking of the MoU marks the parties’ commitment to collaborate to deliver digital solutions for businesses and public sector, explore innovative solutions for network optimisation and implement initiatives that will capture TM customers’ share of moments. The MoU also envisages other areas across TM Group of Companies including network and technology planning, exploration of innovative business model for unifi, transformation of Information and Communications Technology (ICT) to enhance overall efficiency of TM’s IT and Business support platform, smart device cooperation, establishment of Multimedia University (MMU) Smart Campus model and knowledge sharing on innovative technology. According to the MoU, Huawei will share its extensive global best practices to help TM capitalise emerging opportunities quickly through big data aided network design and deployment, intelligent Smart Capex solution to respond fast to TM customer needs, and simplify business engagement between both organisations via inter-connecting IT processes. Through this strategic partnership, TM aspires to pursue the innovation and commercialisation of technology which includes Internet of Things (IoTs), cloud technology and artificial intelligence towards delivering digital experience to more Malaysians nationwide. TM will also explore alternative wireless technology deployment to further expand high speed broadband reach across Malaysia; bridging the digital divide and meeting the Government’s objective of a truly connected society. The MoU is subject to a definitive agreement to be signed between the parties in specific areas. Further announcements will be made in due course, as and when appropriate.
TM turns in revenue of RM5.78 billion YTD for 1H2018 amidst challenging environment
Key Highlights of 1H2018: Performance to-date: Group Revenue of RM5.78 billion Group Reported Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) at RM1.61 billion Group Reported Earnings Before Interest and Tax (EBIT) stood at RM444.5 million; Group Normalised EBIT at RM433.0 million Group Reported Profit After Tax and Non-controlling Interests (PATAMI) was RM259.1 million; Group Normalised PATAMI stood at RM261.1 million Telekom Malaysia Berhad (TM) today announced its financial results for the first half of the year ended 30 June 2018. The Group posted revenue of RM5.78 billion year-to-date, 2.7% lower from RM5.94 billion in the corresponding period last year. This was primarily due to a decline in voice, data and other telecommunication related services as well as provisions recognised against wholesale revenue impacted by regulatory mandated access pricing. Group Reported Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for 1H2018 was RM1.61 billion as compared to RM1.80 billion in 1H2017 mainly due to the lower revenue. Stripping off non-operational items, such as unrealised forex loss on trade settlement, Group Normalised EBITDA was 13.9% lower, at RM1.60 billion. Group Reported Earnings Before Interest and Tax (EBIT) for 1H2018 was RM444.5 million as compared to RM560.9 million in 1H2017. Stripping off some non-operational items, in particular unrealised foreign exchange loss on international trade settlement, normalised EBIT stood at RM433.0 million. Group Reported Profit After Tax and Non-controlling Interests (PATAMI) was at RM259.1 million, whilst Group Normalised PATAMI was RM261.1 million, after setting aside non-operational items such as unrealised forex impact on borrowings and international trade settlements. Datuk Bazlan Osman, Acting Group Chief Executive Officer, TM said: "The first six months of 2018 has been very challenging for us, from rapid developments in the market to increasing regulatory pressures. Given the current landscape, these events further add challenges to our financial performance. Being cognizant of the potential impact to TM, we had revised our 2018 Headline KPIs as well as Capex guidance in early July 2018. Alongside this revision, we also launched our Performance Improvement Programme (PIP 2018) as a broad initiative to overcome the headwinds. The PIP 2018 is guided by four (4) main pillars - Revenue Uplift, Sustained Profitability, Improved Cash Flow and Increased Productivity. We expect the regulatory and sector challenges to persist in the near-to-midterm and undertaking these PIP 2018 initiatives are necessary measures to ensure the sustainability of our business for the long term." The total capital expenditure (CAPEX) for 1H2018 amounted to RM710 million or equivalent to 12.3% of revenue. Of the total capex investment, 18% was allocated for Core Network, 59% was for Access, and the balance 23% for Support Systems. “Delivering convergence and going digital remains our priority. We will continue to focus on growth, yet be more prudent in our spending and sweat our existing assets. As such, we are also revising our capex guidance for the full year to 19 – 20% of revenue.” “We currently have 2.30 million broadband customers and in terms of convergence, we saw more customers moving up the value chain with having triple-play services and above, evidenced by our convergence penetration now at 47% compared to just 37% in 2Q 2017,” he added. At the media briefing, TM also announced that its unifi Basic plan, which is a 60GB broadband-only unifi plan will now be extended to everyone beginning September 2018 (no longer exclusive for households with income of less than RM4,500 per month). “Affordability and accessibility of quality highspeed broadband services is important to TM, and we are committed to lead the charge to unlock the potential of a digitally-savvy Malaysia. As such, we are happy to announce that we are extending the unifi basic plan to all,” he concluded. Comparison: Quarter-on-Quarter (2Q2018 vs 1Q2018 Results) For the current quarter under review, Group Revenue stood at RM2.94 billion, higher by 3.1% QoQ mainly attributed to an increase in data, internet and other telecommunication related services. Group EBITDA rose 10.3% QoQ to RM845.9 million from RM766.7 million the previous quarter. Stripping off non-operational items, such as unrealised forex loss on trade settlement, Group Normalised EBITDA was 5.9% higher, at RM823.4 million. Group EBIT grew by 27.2% QoQ to RM248.9 million from RM195.6 million in 1Q2018. On a normalised basis, EBIT improved by 9.6% QoQ to RM226.4 million from RM206.6 million in 1Q2018. Group PATAMI was at RM102.0 million, lower by 35.1% QoQ from RM157.1 million in the preceding quarter, whilst Group Normalised PATAMI was RM155.8 million QoQ, higher by 48.0% QoQ, after setting aside non-operational items such as unrealised foreign exchange impact on borrowings and international trade settlements. Comparison: Year-on-Year (2Q2018 vs 2Q2017 Results) For the current quarter under review, Group Revenue stood at RM2.94 billion, lower by 1.5% YoY mainly due to voice and data services. Group EBIT stood at RM248.9 million, lower by 3.2% YoY from RM257.1 million in 2Q2017. On a normalised basis, EBIT was lower by 25.6% YoY to RM226.4 million from RM304.5 million in 2Q2017. Group PATAMI stood at RM102.0 million, less 51.5% as compared to 2Q2017; whilst Normalised PATAMI also decreased 25.1% YoY to RM155.8 million from RM208.0 million in 2Q2017. Prospects for the Current Financial Year Ending 31 December 2018 The recent regulatory challenges and market environment have had major impact to the overall revenue estimates and earnings of TM Group in the current quarter. TM anticipates that the challenging environment will persist for both of our retail and wholesale segments. In the midst of these challenges, TM will continue our focus towards strengthening performance of our core business and operations.
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